From Measuring to Knowledge to Value

The basic principle of Value Based Health Care is both simple and timeless. The value of care is determined by care outcomes in relation to its costs. It starts by measuring outcomes and costs; measuring patient reported outcomes on one hand and related health care costs on the other.

The practice can be rather complicated. Consider only measuring health care costs. How can you actually do this? Well-known ‘gurus’ such as Robert Kaplan propose to determine costs through Activity Based Costing (ABC) – or variants thereof. This analyzes which activities are necessary for which care paths, and the costs of these activities. It also provides insight into actual treatment costs.

Measuring is no Small Feat

Measuring sounds easier than it is. How are overhead costs allocated? How do we deal with the costs of complications that may arise, or readmission costs? Do you calculate only institutional costs, or do you calculate total costs in the process, or even the total social costs?

Suppose a care provider knows the exact cost of a treatment, and suppose they will use this information actively to determine which treatments are provided to which patient; will this actually lead to a better financial result for the care provider? Not necessarily.

Savings on paper are not the same as savings in the wallet. In practice, actual cost are determined by organizational revenue. Many costs are fixed. Only when revenue is decreased at the organization level, are measures taken to reduce ‘real’ costs, e.g., reducing the number of beds.

Measuring cost is no small feat. While measuring may help us to understand costs vs. outcomes, the path to knowledge can be complicated.

Meaningful Results

Does this mean that Value Based Health Care is a theory that does not work in practice because it’s too complex? Definitely not. The interesting thing about Value Based Health Care is that you can start relatively small, and still realize meaningful results. This can be done by measuring patient reported outcomes. Implementing this does not necessarily have to be complicated, especially when good IT tools are being deployed.

Begin with patient reported outcomes and use them as a starting point for continuous improvement; it can lead to surprising insights. Eventually, this will lead to better quality while controlling costs.

The basic principle of Value Based Health Care is both simple and timeless. Implementing a Value Based Health Care model may be inevitable, but sometimes complex. Therefore: start simple. Start with measuring patient reported outcomes.